Lawyer from Hoboken Hospital Authority says critics are wrong about events that led to hospital's bankruptcy filing

File photoThe Hoboken University Medical Center. The U.S. Attorney and the state Attorney General have been asked to investigate allegations of fraud raised by the hospital's former attorney.

HOBOKEN — A lawyer with the Hoboken Hospital Authority says critics are purposefully mischaracterizing the events leading up to the bankruptcy of the city’s hospital to further their own agenda.

In the most detailed defense of allegations that the city-backed authority pushed the hospital into bankruptcy, the authority’s attorney Ken Rosen said the hospital was spending money it did not have and incorrectly assumed the city would pick up the difference.

“Advice apparently was given to the hospital that it had an unlimited source of funding from the authority and from the city.” Rosen said in an email Saturday. “When the Authority members discovered the extent of the Hospital's losses, they directed that the hospital live within its budget."

Rosen, a lawyer with Lowenstein Sandler, said “The Authority did what was necessary. They should be commended rather than criticized. “

The hospital’s former attorney, Donald Scarinci, of Scarinci & Hollenbeck, alleges in court papers that the authority was withholding million of dollars in required payments to push the hospital in bankruptcy. He resigned two weeks before the hospital filed for bankruptcy on Aug. 1, saying in court papers that he did not want to be part of the “fraud” that the city was orchestrating.

The ultimate goal, he said, was to ensure an investment group that owns the Bayonne Medical Center gets to purchase the hospital. The group wants to buy the hospital for $65 million and convert it to a private facility.

Scarinci’s accusations are in e-mails and motions filed in response to questions by the attorney for the hospital’s authority about whether he violated attorney ethics by meeting with attorneys for the creditors to talk about his ex-client.

The city-backed authority was created in 2007 thanks to a state law passed to help save Hoboken's struggling hospital. The authority took out $52 million in city-guaranteed bonds to purchase the hospital from Bon Secours, who had asked the state for permission to close the facility.

As required by state law, the authority entered into a management agreement with Hudson Healthcare Inc. to operate the hospital, though the authority approved all budgets and its top management team. Hudson Healthcare Inc. file for bankruptcy last month, threatening to give creditors just a fraction of the $34 million they are owed.

A federal bankruptcy judge will hear arguments tomorrow on several critical issues related to the proposed sale, including whether the creditors can seek money from the authority on behalf of Hudson Healthcare Inc.

State Sen. Loretta Weinberg (D-Bergen) has asked the U.S. Attorney’s Office and the state Attorney General’s Office to investigate Scarinci’s allegations before the state approves a transfer of the hospital’s license.

Weinberg, who said she called for the probe after reading about the allegation in The Star-Ledger, had already scheduled a hearing today on non-profit hospitals being converted into private facilities. She will expand it to include the circumstances around the sale of the hospital. The hospital is waiting for the state to approve the transfer of the license and several court rulings before the sale can go through.

The hearing begins at 2 p.m.

"It is very unfortunate when politicians and professionals with private agendas seek to mischaracterize a process that has been fair and transparent and to disparage people who have given generously of their time in a selfless way solely to benefit their community,” Rosen said.

He added, “What's worse is that, when it comes time to apologize, they will stay silent.”